This Act matters when a business uses limitation clauses, exclusions, indemnities or standard terms. In B2B contracts, a clause that looks commercially useful can still fail if it does not satisfy the statutory reasonableness test where the Act applies.
Main laws
United Kingdom Act
Unfair Contract Terms Act 1977
The Unfair Contract Terms Act 1977 limits how far liability can be excluded or restricted in certain UK contracts.
In forceUnited KingdomPlain-English guide4 practical checks
Plain-English explainers, not legal advice. Use the linked official source for section-level detail, and get advice for your situation.
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Quick read
- This Act matters when a business uses limitation clauses, exclusions, indemnities or standard terms.
- In B2B contracts, a clause that looks commercially useful can still fail if it does not satisfy the statutory reasonableness test where the Act applies.
Likely relevant if
- Businesses using standard terms
- Suppliers limiting liability
- Agencies and consultants
Check first
- Check whether exclusions and limitations are within scope
- Draft liability clauses that are reasonable in context
- Avoid excluding liability where the law prohibits it
What this means in practice
Key points
- A liability cap should be commercially explainable.
- Standard terms need extra care because the other side did not negotiate them.
- Insurance, price and control of risk all matter when testing reasonableness.
When this law usually matters
Most businesses do not need to memorise the whole law. The useful starting point is to know when it is likely to affect a contract, customer journey, employee process, data flow or company decision.
Key points
- Businesses using standard terms
- Suppliers limiting liability
- Agencies and consultants
- Businesses contracting on purchase orders or terms of supply
What to check first
Sense check
- Check whether exclusions and limitations are within scope
- Draft liability clauses that are reasonable in context
- Avoid excluding liability where the law prohibits it
- Make sure negotiated risk allocation matches insurance and pricing
Documents and workflows to review
Key points
- Terms of business
- Supply agreements
- Consulting agreements
- Indemnities
- Insurance schedules